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CVP Analysis Assignment

CVP Analysis

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Joanna Dandasan
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32 views3 pages

CVP Analysis Assignment

CVP Analysis

Uploaded by

Joanna Dandasan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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CVP ANALYSIS – SINGLE PRODUCT

1. To which function of management is CVP analysis most applicable?


a. Planning
b. Organizing
c. Directing
d. Controlling
2. Cost-volume-profit analysis is a technique available to management to
understand better the interrelationships of several factors that affect a firm’s
profit. As with many such techniques, the accountant oversimplifies the real world
by making assumptions. Which of the following is not a major assumption
underlying CVP analysis?
a. All costs incurred by a firm can be separated into their fixed and variable
components.
b. The product selling price per unit is constant at all volume levels.
c. Operating efficiency and employee productivity are constant at all volume
levels.
d. For multi-product situations, the sales mix can vary at all volume levels.
3. After reviewing its cost structure (variable costs of P7.50 per unit and monthly
fixed costs of P60,000) and potential market, Equiz Inc. established what it
considered to be a reasonable selling price. The company expected to sell
50,000 units per month and planned its monthly results as follows:
Sales P500,000
Variable costs (375,000)
Contribution Margin P125,000
Fixed costs (60,000)
Income before taxes P65,000
Income taxes at 40% (26,000)
Net Income P39,000

NOTE: Answer the following questions independently, unless otherwise stated.

Q1: What is the breakeven point in units?


a. 24,000 units
b. 30,000 units
c. 20,000 units
d. 35,000 units
Q2: If the company wants a P60,000 before-tax profit, how many units must it
sell?
a. 24,000 units
b. 48,000 units
c. 54,000 units
d. 60,000 units
Q3: If the company wants an after-tax return on sales of 9%, how many units
must it sell?
a. 24,000 units
b. 48,000 units
c. 54,000 units
d. 60,000 units
Q4: If the company wants an after-tax profit of P45,000 on its expected sales
volume of 50,000 units, what price must it charge?
a. P11.20
b. P10.20
c. P10.36
d. P11.90
Q5: If the company wants a before-tax return on sales of 16% on its expected
sales volume of 50,000 units, what price must it charge?
a. P11.20
b. P10.20
c. P10.36
d. P11.90
4. Manalao Corp. manufactures and sells T-shirts imprinted with college names and
slogans. Last year, the shirts sold for P7.50 each, and the variable cost to
manufacture them was P2.25 per unit. The company needs to sell 20,000 shirts
to breakeven. The net income after-tax last year was P5,040. Manalao’s
expectations for the coming year include the following:
 The sales price of the T-shirts will be P9.00
 Variable costs to manufacture will increase by one-third
 Fixed costs will increase by 10%
 The income tax rate of 40% will be unchanged
Sales for the coming year are expected to exceed last year’s by 1,000 units. If
this occurs, Manalao’s sales volume in the coming year will be
a. 22,600 units
b. 21,960 units
c. 23,400 units
d. 21,000 units
5. The following information relates to Dandasan Corp.
Sales at breakeven point P312,500
Total fixed expenses 250,000
Net operating income 150,000
What is Dandasan’s margin of safety?
a. P62,500
b. P100,000
c. P187,500
d. P212,500
6. Cabrieto’s sales for the current year is P250,000. Its degree of operating
leverage is 4. How much is the breakeven point in peso amounts?
a. P187,500
b. P150,000
c. P62,500
d. P60,000
7. Almero Corp. would like to market a new product at a selling price of P15 per
unit. Fixed costs for this product P1,000,000 for less than 500,000 units of output
and P1,500,000 for 500,000 or more units of output. The contribution margin
percentage is 20% What would be the amount of the sales pesos to earn a target
operating income of P1,000,000?
a. P11,323,500
b. P12,500,000
c. P12,382,950
d. P11,779,800
8. On October 1, 2024, Baladiang Corp. increased its direct labor wage rates. All
other budgeted costs and revenues were unchanged. How did this increase
affect Baladiang’s budgeted breakeven point and budgeted Margin of Safety?

A B C D
Budgeted Breakeven Point Increase Increase Decrease Decrease
Budgeted Margin of Safety Increase Decrease Decrease Increase

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